03/26/2002 08:07 AM House STA

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* first hearing in first committee of referral
+ teleconferenced
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ALASKA STATE LEGISLATURE HOUSE STATE AFFAIRS STANDING COMMITTEE March 26, 2002 8:07 a.m. MEMBERS PRESENT Representative John Coghill, Chair Representative Jeannette James Representative Hugh Fate Representative Gary Stevens Representative Peggy Wilson Representative Harry Crawford Representative Joe Hayes MEMBERS ABSENT All members present COMMITTEE CALENDAR HOUSE BILL NO. 361 "An Act relating to pilot pay programs to attract and retain exceptional state employees; and providing for an effective date." - MOVED CSHB 361(STA) OUT OF COMMITTEE HOUSE BILL NO. 380 "An Act relating to reimbursement for certain Medicare premium charges for persons receiving benefits from the teachers' retirement system, the judicial retirement system, the elected public officers retirement system, and the public employees' retirement system." - HEARD AND HELD HOUSE BILL NO. 397 "An Act exempting a person driving a snowmobile from driver licensing requirements." - HEARD AND HELD SPONSOR SUBSTITUTE FOR HOUSE BILL NO. 315 "An Act allowing employers that are small businesses, small nonprofit organizations, or small associations for insurance purposes to join state employee insurance coverage as a group; and providing for an effective date." - HEARD AND HELD PREVIOUS ACTION BILL: HB 361 SHORT TITLE:PILOT PAY PROGRAM FOR STATE EMPLOYEES SPONSOR(S): REPRESENTATIVE(S)KOTT Jrn-Date Jrn-Page Action 01/28/02 2079 (H) READ THE FIRST TIME - REFERRALS

01/28/02 2079 (H) STA, FIN 02/05/02 (H) STA AT 8:00 AM CAPITOL 102 02/05/02 (H) Heard & Held 02/05/02 (H) MINUTE(STA) 03/26/02 (H) STA AT 8:00 AM CAPITOL 102 BILL: HB 380 SHORT TITLE:REIMBURSE CERTAIN RETIREE MEDICARE CHARGE SPONSOR(S): REPRESENTATIVE(S)JAMES Jrn-Date Jrn-Page Action 02/04/02 2143 (H) READ THE FIRST TIME - REFERRALS 02/04/02 2143 (H) STA, FIN 02/19/02 2329 (H) COSPONSOR(S): HUDSON 02/28/02 (H) STA AT 8:00 AM CAPITOL 102 02/28/02 (H) Scheduled But Not Heard 03/14/02 (H) STA AT 8:00 AM CAPITOL 102 03/14/02 (H) Scheduled But Not Heard 03/19/02 (H) STA AT 8:00 AM CAPITOL 102 03/19/02 (H) Heard & Held MINUTE(STA) 03/19/02 2611 (H) COSPONSOR(S): STEVENS, CRAWFORD 03/26/02 (H) STA AT 8:00 AM CAPITOL 102 BILL: HB 397 SHORT TITLE:EXEMPTIONS FROM DRIVER'S LICENSING SPONSOR(S): TRANSPORTATION Jrn-Date Jrn-Page Action 02/08/02 2183 (H) READ THE FIRST TIME - REFERRALS 02/08/02 2183 (H) TRA, STA 02/21/02 (H) TRA AT 1:00 PM CAPITOL 17 02/21/02 (H) Moved CSHB 397(TRA) Out of Committee 02/21/02 (H) MINUTE(TRA) 02/25/02 2381 (H) TRA RPT CS(TRA) NT 6DP 02/25/02 2381 (H) DP: KOOKESH, KAPSNER, SCALZI, OGAN, 02/25/02 2381 (H) MASEK, KOHRING 02/25/02 2381 (H) FN1: ZERO(CRT) 02/25/02 2381 (H) FN2: ZERO(DPS) 03/21/02 (H) STA AT 8:00 AM CAPITOL 102 03/21/02 (H) Scheduled But Not Heard 03/26/02 (H) STA AT 8:00 AM CAPITOL 102 BILL: HB 315 SHORT TITLE:GROUP HEALTH INSURANCE FOR PRIVATE GROUPS SPONSOR(S): REPRESENTATIVE(S)ROKEBERG Jrn-Date Jrn-Page Action

01/14/02 1957 (H) PREFILE RELEASED 1/11/02

01/14/02 1957 (H) READ THE FIRST TIME - REFERRALS

01/14/02 1957 (H) REFERRALS WITNESS REGISTER LINDA SYLVESTER, Staff to Representative Pete Kott Alaska State Legislature Capitol Building, Room 204 Juneau, Alaska 99801 POSITION STATEMENT: Presented HB 397. CHUCK HOSACK, Deputy Director Davison of Motor Vehicles Department of Administration Anchorage, Alaska 99503 POSITION STATEMENT: Testified in support of [ACTION NARRATIVE TAPE 02-31, SIDE A Number 0001 CHAIR JOHN COGHILL called the House State Affairs Standing Committee meeting to order at 8:07 a.m. Representatives Coghill, James, Fate, Stevens, Crawford, and Hayes were present at the call to order. Representative Wilson arrived as the meeting was in progress. HB CHAIR COGHILL announced that the first order of business would be HOUSE BILL NO. 361, "An Act relating to pilot pay programs to attract and retain exceptional state employees; and providing for an effective date." LINDA SYLVESTER, Staff to Representative Pete Kott, Alaska State Legislature, explained that HB 361 concerns with regard to the excellence bonus. Members felt that the excellence bonus was susceptible to cronyism; the Department of Administration agreed. Therefore, the committee substitute (CS) [Version 22-LS1317\F, Cook, 3/20/02] eliminates the excellence bonus. The majority of labor's concerns are satisfied [with the CS]. However, one representative continues to oppose the bill because these programs are excluded from collective bargaining. Ms. Sylvester explained that these programs are excluded from collective bargaining because they are pilot programs. Furthermore, maintaining these programs under the purview of the Personnel Board provides tighter control in terms of targeting and record keeping. She directed attention to page 5, lines 25-27, which discuss the commissioner of administration's report on each pilot pay program. At that time, it will be determined whether or not the programs worked and whether or not the programs should be maintained. If the programs are maintained, the programs will be included in the Personnel regulations in statute and will be included in the collective bargaining. MS. SYLVESTER remarked that [HB change it entirely. MR. STEWART said that under the law there is no opportunity to do anything financial for retention purposes. The retention awards built into the system involve one's career path, one's opportunity to promote or be considered for promotion, and movement in and around the state system. "There's no provision currently in state pay plan or in the definition or application of the merit system that allows for, other than (indisc.- coughing) of effort either at ceremony or not at ceremony," he specified. CHAIR COGHILL related his understanding that [the state] looks in-house first for [open] positions. He identified that as a retention gain. MR. STEWART said that the idea of promotion from within is probably the only method of recognition other than sectional/divisional certificates of achievement. In further response to Chair Coghill, Mr. Stewart remarked that he would love to be able to return to the legislature in a couple of years and report that turnover rates are [the result of] retirements and planned progressions and that the retention rates have dropped. Therefore, the skill sets could work through the workforce, he said. Number 2341 REPRESENTATIVE JAMES referred to page 13 of a document entitled, "Recruitment, Retention, and Promotion of Employees in the Biological Sciences 2001" by the Division of Administration, Alaska Department of Fish and Game (ADF&G). Page 13 discusses the effect of inflation on state employee pay since 1985. Representative James said that off the top of her head she would suggest that [the state] hasn't kept pace with inflation. However, she wondered how the 1985 rates compared to the private sector then and now. Still, she said she feels that the state pay is under the private sector. Although Representative James noted her agreement that the state is underpaying its employees, she said she didn't believe it's to the extent specified. MR. STEWART pointed out that the last major salary study was done in December 2000, which he offered to provide Representative James. REPRESENTATIVE JAMES related her belief that when private sector rates were high, the state was parallel to those or slightly higher. Then, when the private sector rates went down, the state's didn't. The [change in rate] hasn't annual basis, and she wasn't sure it could be done annually because the state can't [merely follow the private sector]. Number 2431 CHAIR COGHILL mentioned the need to realize [the possibility] of creating a situation in which certain job classes would have continual recruitment bonuses and other job classes would experience stacking. MR. STEWART explained that there was the suggestion that programs adopted under this language be exempt from collective bargaining in order to avoid the stratification. Therefore, it would avoid having one plan for supervisors and one plan for worker bees [while both] being in the same job class. However, he noted that there may be supervisory/managerial job classes that require their own recruitment and retention program. CHAIR COGHILL interjected, "We're going to bump up against the edge of that, though. And that's something that probably should be looked out whenever the report is brought out." Number 2542 REPRESENTATIVE FATE inquired as to the state of the current vacancy and turnover rate as compared to those presented in the aforementioned document. MR. STEWART said that the division is in the process of reducing the data for 2001. Although there hasn't been a comparison yet, he expected the numbers to be fairly similar. REPRESENTATIVE FATE asked what has been done to mitigate, improve, the turnover rate. MR. STEWART explained that the Division of Personnel has met with agency staff and has developed a number of recruitment flexibilities. For example, agencies have been allowed to recruit for a job class rather than a specific position. The division has also allowed for continuous recruitment for job classes that are of a higher turnover rate or their advertisement response rates are low. He offered to provide Representative Fate with a list of things that are being done to address this problem. CHAIR COGHILL announced that he would be recommending discussion and insertion of language [requiring] an intermediary report in Number 2680 BRUCE LUDWIG, Business Manager, Alaska Public Employees Association (APEA) and the Alaska Federation of Teachers (AFT); Secretary/Treasurer, Alaska AFL-CIO (American Federation of Labor and Congress of Industrial Organizations), provided the following testimony: While the bill isn't as offensive as it was - we appreciate taking out the personal bonuses - we're still opposed to it. We believe that we do have a serious recruitment problem. We don't believe that we're competitive. We believe we pay lower than standard wages. Our retirement system is no longer a magnet. And we pay more in health insurance than most of the competition. You know, we've known this for a long time. And we've ... cut back - ways to save money for the state - and we've thrown it on the backs of the employees. And when people are looking at jobs, they look at those things. We have a state of the art recruitment system right now with Workplace Alaska Hiring System. And how that got in place was through a pilot project negotiated with our union .... And I .. would suggest here is a similar pilot project, but do it through collective bargaining, do it through labor management committees. If you get the worker bees involved, you're going to find what works and what doesn't work. ... So, I would like to recommend that ... you change it to go through a labor management process. I'd also like to suggest that you make this bonus compensation for retirement purposes. ... REPRESENTATIVE JAMES noted her agreement with Mr. Ludwig's comments. She inquired as to Mr. Ludwig's opinion with regard to how much of this opportunity [to make changes in job positions] comes from the people at the lower level versus those in management. She related her notion that it seems people would be reluctant to recommend changes that would eliminate a fellow employee's job. MR. LUDWIG informed the committee that although there was once an incentive program that gave part of the money saved in some process to the employee involved in creating the savings, it was never fully implemented. Mr. Ludwig pointed out that none of the options discussed with regard to recruitment and retention have involved talking with the workers to determine what would entice an employee to a job and make that employee want to stay. The labor management process provides that employee input. CHAIR COGHILL remarked that although the bill may not demand [the input from the employee], there is certainly the intention [for the employees] to be included in the discussion. MR. LUDWIG specified that his opportunity, as a bargaining agent, is through his ability to testify on the regulations before the Personnel Board. Any member of the public has the right to do so. CHAIR COGHILL related his understanding that the Personnel Board will designate these bonuses, which they will discuss with [people] such as Mr. Ludwig. MR. LUDWIG said that he didn't see [such language]. There is no requirement to have any interface with the bargaining units. "In here, we're giving the administration the right to unilaterally set wages and do it out of their budget, the way they want to do it. ... I don't see where this, politically, is a win-win situation for anybody," he remarked. Number 2963 REPRESENTATIVE JAMES acknowledged Mr. Ludwig's frustration. She noted her own frustration with the APEA union because this union negotiates with an administration that has no ability to pay. The legislature is involved ... TAPE 02-31, SIDE B MR. LUDWIG, in response to Representative James, related his belief that the more that is taken from bargaining and the less interaction there is with the employees, the more top down the management structure. CHAIR COGHILL characterized that as part of the public policy call. "If we want the state to do the recruiting, then we need to give them the authority. If we wanted information as to how the employees viewed that, I think we would go then to the collective bargaining," he said. He highlighted that the legislature is giving the administration not the collective bargaining unit the responsibility for employment, retention, and recruitment. Still, he agreed that those most impacted should be heard. Number 2883 REPRESENTATIVE JAMES opined the importance of having this bottom-up suggestion process. "I could probably go where you want to go today on this issue, except I think I'm probably willing to go ahead with this if we had that part of the agreement that there would be this interaction to figure out how not only to do the job better but to do it for less ..., and the how the responsibility of that is part of this whole issue of retention," she said. She pointed out that the issue of retention can be found everywhere, [especially] with the heavy reduction in 18-44 year olds [in the state]. This situation will continue until the state builds some economic activity, she predicted. She said she didn't think putting "that" bill would be that helpful. CHAIR COGHILL requested that Mr. Stewart respond to [Mr. Ludwig's suggestion]. Chair Coghill reiterated his view that this legislation provides the administration with a responsibility. However, he related his belief that those in the collective bargaining units should have an engaged voice as an interested party. He invited Mr. Stewart to comment. MR. STEWART agreed to involve the management and the employees of the collective bargaining unit in regard to the formation of and consideration of the priority lists presented to the Personnel Board. In fact, in a meeting with the representatives of the collective bargaining [unit], [the division] mentioned [that it would be happy to have them involved] at that point. "We believe that once the regulatory process takes place and ... the Personnel Board adopts the program, the narrowest possible control will provide us with the opportunity to come back and say whether it's worked or not," he explained. CHAIR COGHILL expressed agreement in that if the legislature is going to require the [division] to provide the final answer, then it should have the final say. However, in the regulation and board process he expected those in the collective bargaining management positions to help with the prioritization and the discussion of the regulatory scheme. Number 2717 CHAIR COGHILL suggested that there be a report on this in 2004. Therefore, he offered the following conceptual [Amendment 1] on [page 5], line 26, that there be a report [on the progress of this pilot project] to the legislature during the 2004 legislative session. REPRESENTATIVE HAYES said that it seems like this is a no-win situation. On the one hand, there is the knowledge that there is a problem with recruiting and retaining state employees. On the other hand, legislation freezing the hiring of state employees is moving through the Senate. He questioned the message being sent to employers and potential employees. REPRESENTATIVE JAMES agreed that Representative Hayes' scenario is concerning. However, she pointed out that the Senate Bill isn't before the committee. CHAIR COGHILL asked if there is any objection to conceptual Amendment 1. There being none, conceptual Amendment 1 was adopted. Number 2550 REPRESENTATIVE FATE remarked that he has seen recruitment bonuses do well. The retention bonuses that he has seen work are based on efficiency and productivity. He related his skepticism with regard to giving bonuses merely to retain people. Although Representative Fate viewed the recruitment [portion of the bill] as being on the right track, he had concerns [with regard to the other provisions of the bill]. Number 2495 REPRESENTATIVE CRAWFORD recalled Representative James' comment regarding the public-private sector in Alaska. He informed the committee that over the years, the building trade has graduated a number of apprentices. However, Alaska isn't able to retain them due to losses to the West Coast states. Moreover, Alaska's private sector wages haven't kept pace with other states either. Last year, there was a shortage of ironworkers, pipefitters, and other trades people in the state. Representative Crawford related his belief that throughout Alaska there is a systemic problem because Alaska's wages haven't kept pace over the last several years. Therefore, he expressed the need to make stronger structural changes than merely receiving bonuses from within the department's budget. CHAIR COGHILL commented that the systemic issue on the societal level is that Alaska has drifted into a service-based industry rather than a production-based industry. REPRESENTATIVE JAMES acknowledged that many people are leaving the state because there aren't opportunities in the state [for them]. However, there are many people who would stay regardless of the wages. Therefore, she felt that there will be a fight with regard to who gets the employees and thus [this legislation] might help with retention and [recruitment]. Although the retirement and insurance situations in the state have changed, it's much better than what's in the private sector. Therefore, addressing the wages, even at a lower level, could result in people staying. Number 2302 REPRESENTATIVE JAMES moved to report HB CHAIR COGHILL announced that the next order of business would be HOUSE BILL NO. 380, "An Act relating to reimbursement for certain Medicare premium charges for persons receiving benefits from the teachers' retirement system, the judicial retirement system, the elected public officers retirement system, and the public employees' retirement system." He informed members that only testimony would be taken today. Number 2199 TOM HARVEY, Executive Director, National Education Association - Alaska (NEA-AK), related Mr. Jerry Patterson's regret that he couldn't change his schedule to be present today. Mr. Harvey recalled that Mr. Patterson, at the prior hearing on HB Furthermore, this legislation wouldn't cost municipalities or school districts because these are all retirement monies. He informed the committee that last year when the legislature passed legislation lowering the age requirement for retiring and maintaining medical converge, there was a fiscal note with a cost to employers and a statement of unfunded liability. He pointed out that the contribution rate fell last year by 1 percent for the employers, which is because of the annual excess earnings in the retirement system. The fund needs a return of 8.25 percent in order to maintain the earlier mentioned funding ratio. As mentioned earlier, over the past 20 years the fund's return has been 11.48 percent. Even with a down market, the five-year return ending June 30, 2001, averaged 9.37 percent, which places the fund well over the 8.25 percent necessary. The excess earnings in the Teachers' Retirement System (TRS) since Retirement System, the excess earnings has been $1.6 billion. Those excess earnings have been placed toward improving the funding ratio of the system. In 1996 the funding ratio was 55 percent and although that is healthy by many standards, it could be improved upon. On June 30, 2000, the funding ratio was 99.7 percent, which has now declined to 95 percent. Therefore, 1 percent of the $12 billion in excess earnings would [amount to] $120 million. He reminded everyone that the annual cost is $30.4 million. "Really it's only $6.6 million. to put that other money in the bank," he explained. Therefore, this is one-fourth of 1 percent of the excess earnings. In conclusion, Mr. Harvey specified that the fiscal note, although necessary, wouldn't impact GF money or the viability of the retirement system. The fiscal note adds to the excess earnings of the retirement system. Number 1653 SAM TRIVETTE, President, Retired Public Employees Association of Alaska (RPEA), turned to the question - asked at the last hearing - regarding whether the state actually committed in writing to cover medical expenses for employees. The pending lawsuit has already moved through the Superior Court. Mr. Trivette provided the committee with 14 pages of court findings, which he felt clearly [demonstrates] that the state did make such a commitment in writing. MR. TRIVETTE explained that RPEA is comprised of retirees from all areas of public employment. He pointed out that RPEA has a medical insurance committee that provides education with regard to medical issues. Furthermore, RPEA has performed medical surveys inquiring of the membership what is working and what isn't. Many of RPEA's members have complained about having to pay the Medicare premium of $54 a month, which is predicted to increase in the future. This cost has a significant impact on the retirees, especially for older retirees and those in the lower pay ranges. Mr. Trivette echoed earlier testimony that there will be no cost to the GF for this reimbursement. Furthermore, the employer contribution has decreased significantly due to the financial well being of the fund. Moreover, he related that PERS is funded at 101 percent, which is superb. Mr. Trivette said, "It's only fair that since the state pays a much smaller amount of medical expenses for retirees once the retirees turn 65 that some of the savings should be shared with the retirees." In closing, Mr. Trivette encouraged the committee's support of the legislation. REPRESENTATIVE JAMES reminded the committee that she has a conflict on this issue because she is 72 years of age, and as soon as she doesn't work she will fall into this retiree category. HB Number 1314 CHAIR COGHILL announced that the next order of business would be HOUSE BILL NO. 397, "An Act exempting a person driving a snowmobile from driver licensing requirements." CHAIR COGHILL asked if there was any objection to the adoption of CSHB 397, document. There being no objection, Version O was before the committee. Number 1286 REPRESENTATIVE VIC KOHRING, Alaska State Legislature, testifying as the sponsor of HB eliminate the need for a driver's license for snowmobiles that aren't operated on the road system in Alaska. He informed the committee that last year the Department of Transportation & Public Facilities (DOT&PF) did a study entitled, "Winter Transportation Study" that revealed those operating off-road vehicles were doing so illegally because of the requirement of a driver's license for those vehicles. Therefore, drafted. Representative Kohring specified that this isn't to say that individuals shouldn't have a driver's license when driving on the road. However, he said he believes that it isn't reasonable for an individual to have to study for a license that is actually geared toward driving a car on a highway when they are going to be operating a snowmobile on a trail or a boat on a lake or river. MIKE KRIEBER, Staff to Representative Vic Kohring, Alaska State Legislature, informed the committee that the bill passed out of the House Transportation Standing Committee accomplished what Representative Kohring wanted. However, the Division of Motor Vehicles (DMV) expressed concern that there was a loophole that would allow a youngster to drive a car down the side of a road. Therefore, Mr. Krieber said that he worked with the Department of Law and DMV in order to develop the language included in [Version O]. [Version O] still accomplishes the exemption of a driver's license requirement for any vehicle off the road. The bill would maintain the driver's license requirement for operation of a vehicle on the road and the vehicle would still be required to meet any equipment requirements. Therefore, this bill simply eliminates the driver's license requirement to operate a motor vehicle off of a road. Number 1033 REPRESENTATIVE HAYES asked if any consideration has been given to having drivers' certification for minors. He expressed concern with not having something in place to address minors [driving vehicles off the road]. MR. KRIEBER answered that it was discussed in the House Transportation Standing Committee, which heard testimony from the director, Division of Parks, Department of Natural Resources (DNR), and from some board members of SnowTRAC (Snowmobile Trails Advisory Committee). The SnowTRAC has formed a group to address safety issues, and they will be presenting a recommendation addressing rural-urban issues in regard to whether there should be a [statewide/regional] safety certification program or training program. Mr. Krieber noted that there are some training programs in place. REPRESENTATIVE STEVENS recalled a constituent complaint that a child in a village was given a ticket for underage driving when the mother was trying to teach the child how to drive. He inquired as to how this would impact an underage child living in a village with no roads. MR. KRIEBER answered that [HB CHAIR COGHILL announced that the last order of business would be SPONSOR SUBSTITUTE FOR HOUSE BILL NO. 315, "An Act allowing employers that are small businesses, small nonprofit organizations, or small associations for insurance purposes to join state employee insurance coverage as a group; and providing for an effective date." REPRESENTATIVE NORMAN ROKEBERG, Alaska State Legislature, testified as the sponsor of ADJOURNMENT Number 0889 There being no further business before the committee, the House State Affairs Standing Committee meeting was adjourned at 9:53 a.m.

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